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Charitable Giving in 2020

On March 27, the U.S. House and Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. There are three big changes that you should be aware of:

New Deduction Available 

To stimulate charitable giving, the CARES Act offers to all taxpayers an outright charitable deduction of $300 for cash gifts to public charities, regardless of whether or not you itemize. This new deduction in annual charitable contributions is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. Donations made since January 1, 2020 count toward the $300 cap. Contributions must be cash donation(s) to qualified charities. Donations to donor-advised funds (DAF) do not qualify.

New Charitable Deduction Limits

Individual donors who can give generously, regardless of their income, may be interested in a tax code change for 2020 that removes any limit to the deductions you can take for charitable contributions if you itemize your contributions. Under the new guidelines, 100% of your donation is now tax-deductible. This means that if your taxable income is $250,000 in 2020, and you give away $250,000 to qualified nonprofits in 2020, you won’t have to pay taxes on your income, and you can carry over gifts beyond your income for the next five years. 

Required Minimum Distribution (RMD) Waiver 

The RMD is waived for IRA and other qualified retirement plan owners for the year 2020. This provision will permit IRA and other qualified retirement plan owners to retain funds in their IRAs. Because the markets declined substantially after the current RMD was calculated based on the plan value on December 31, 2019, Congress determined that it was beneficial to waive the RMD for 2020. Loyal donors may still wish to use IRA funds to make a qualified charitable distribution (QCD). The QCD is available up to $100,000 for individuals who are over age 70½.

2020 Charitable Giving Resources:

Coronavirus Stimulus Package FAQ: Checks, Unemployment, Layoffs and More (New York Times)

The CARES Act (H.R.748)

This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor.